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Marjie O'Connor: The Buzz on Building

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June 25, 2007

Housing Sales Drop; Inventory Jumps

Trolling various news outlets for construction-related articles today was pretty easy. They're all talking about the report from the National Association of Realtors that May home sales reached the lowest point in four years. The NAR also points out that there's now an eight-month inventory of homes on the market, with 2 million more houses for sale than you'd expect in a normal market.

That creates a huge problem for builders, of course. After all, if they don't build -- and sell -- houses, they don't make money. But these days, building houses they can't sell just adds to the excessive inventory.

A lot of jobs rely on the construction industry; it's not just the company owners who stand to suffer when builders slow down production. So do their trade contractors, their local suppliers and the manufacturers who make building materials.

How are you builders dealing with this slowdown? Have you cut production? Or are you still building houses and hoping you can sell them? And what about trades? Are you seeing a serious ripple effect? It's a complex problem; let us know how you're handling it.

Posted by Marjie O'Connor, HGTVPro.com Staff at June 25, 2007 4:43 PM

Comments

It's been my recent experience, one of the biggest and most overlooked issues with builders not being able to sell their properties is lack of customer service. We've looked at several developments where the salespeople have totally turned us off by their attitude and disinterest in selling. Despite our financial qualifications and eagarness to buy.

Builders need to hire employees who want to do their job and take pride in their work. Then follow through to make sure they are doing their jobs. Thousands can be spent on advertising, but when it comes down to it, people buy from people. Lack of care or concern not only brings sales down, it also gives potential customers a bad taste in their mouths about the entire company.

Posted by: Lori at June 27, 2007 9:40 AM

Alot of the new construction in our town is over-priced and small. If you are not willing to spend 300k, then good luck finding a halfway decent home that doesn't duplicate the one next door. Realtors and developers might want to re evaluate the "normal buyer" and return to selling mid range quality homes.

Posted by: L Michels at June 27, 2007 10:22 AM

BUILDERS IN OUR AREA (NORTHEAST FLA) ARE STILL BUILDING HOMES AND HOPING THEY WILL SELL. THEY ARE ASLO CREATING MANY UNHAPPY PAST CLIENTS IN THEIR OWN COMMUNITIES AS THEY ARE PRICING HOMES LOWER THAN WHAT MOST OF THE CURRENT HOMEOWNERS PAID FOR THEIR HOMES.CURRENT HOMEOWNERS WHO NEED TO SELL CAN NOT LOWER THEIR PRICES TO MATCH BUILDERS INVENTORY OF HOMES FOR SALE. SELLERS NOW FEEL AS THOUGH THE BUILDERS HAS HAD TOO MUCH OF A PROFIT MARGIN, IF THEY ARE ABLE TO CUT THEIR PRICS THIS MUCH. MAYBE THE GRAVY TRAIN DOES NEED TO SLOW DOWN? MAYBE GREED HAS OVER COME US ALL! THIRTY YEARS IN THE BUSINESS HERE!

Posted by: Carlene at June 27, 2007 10:28 AM

We bought our home in northern NV four years ago at what is considered now an unheard of low price. We bought in a new tract division we thought would be a mostly a home owner division. Not only were we wrong, but the builder and his realtor sold way to many investment rentals. There should be a law as to how many rentals there can be. Now we have two or more rental signs on every block. Even though our house has doubled in price, the rentals are unkept and an eyesore that will bring our house down. If we can sell at a reasonable price, we are going for land around us next time. Most owners in our division are just as dissapointed.

Posted by: Wayne at June 27, 2007 12:54 PM

Rentals; should not be allowed in new developments, period. It definitely brings down the value of the surrounding property.

Posted by: Marilyn Wright at June 27, 2007 2:03 PM

Here in the northeast (New York, New Jersey) prices and buyers for high-end quality living space is still strong. Customer service and attention to details make a difference, as well as the needs of your clients. There is also a strong market for mid-range priced homes especially in urban areas. City services and school systems as well as easy commuting time to good jobs all come into play in this area.

Posted by: Barbara at June 27, 2007 5:29 PM

We have all been spoiled the past decade with rising property values. The bubble has burst and yes, we must adjust. Lending has become too leniet and people became greedy. People should look at their dwelling as a "home", not an investment. If rising property values happen it's just an added benefit! Stop panicking and enjoy your "home".

Posted by: Linda at June 27, 2007 7:31 PM

Living in an upscale luxury community in New York about 25 miles from NYC, I sold my home about a year ago. I wanted to sell the previous year, but my wife did not want to move. I sold for $800,000.00 and today, the same style and size house that is in my old neighborhood is listed at $599,000.00 asking price and has half of the property taxes of my old house, has been on the market for about 6 months with no offers. All of the real estate web sites have the same tired houses listed for months on end. One in particular has been on for 16 months and went from $739,000.00 to $625,000 and there have been only 4 lookers and no offers. The sellers are in sticker shock and cant believe that their home has dropped so much in value. Unless you have a very unique home or have your house priced to sell, it will be 7 to 9 years minimum before you MAY see the same price your home was once worth.

Posted by: RW. at June 28, 2007 11:21 AM

I believe the industry has been hurt from all the "bad apples" that have taken advantage of the market when it was good. Personally, we had the worst, most unethical realtor (and when we reported her all the local realtor board did was cover up for her.) Also, our unscrupulous builder never honored his remaining obligations.

Posted by: Ellen at June 28, 2007 10:31 PM

My husband and I looked for three years before buying and went through 23 agents before we were completely disgusted by the lack of professionalism, unehtical behavior and sheer stupidity. There should be far more stringent academic and professional requirements and qualifications for those seeking a job in the real estate industry including realtors/brokers, mortgage brokers, lenders, title company officers, etc. Most of the people in the industry in the past 3-5 years were the same schmucks trying to sell multi-level marketing and ponzi schemes a decade ago. By and large the industry attracts slimely, greedy, moronic individuals with no talent and skill. In an industry build on smoke and mirrors, it is not surprising that the charlatans who work in the field can bring much of the country's economic backbone to a crashing halt.

Posted by: TR, Santa Cruz, CA at July 5, 2007 7:23 PM

We bought 1/3 acre in Campbelltown, Pa.in 2002 for $36,000.00.My husband had a builder from here build a home for us to move into October, 2003.He paid at that time $139,000.00. Then July 14, 2004 our 9 month old house was taken away by the worst F-4 Tornado to hit this area. The only things left was the cement wall walk out basement, the kitchen stove which was a Prof.Thermador,all cabinets and counter tops,Kohler black kitchen sink, Kitchenaid dishwasher and the only door still standing in the doorway was my Brand New Pella Floral Storm door. Well my husband used the same builder to rebuild the same house and it cost us close to $200,000.00 to rebuild the house. The basement foundation was still in great condition. How could the price of this house go up so high in such a short period? The builder put linoleum and low grade carpeting. The first time the floors were the large ceramic tiles and better grade of carpeting. We had always bought our own appliances and light fixtures and fans from Lowes.Boy did we learn our lesson. Shop around and get a bid from a couple of builders not just one. Now this same builder is charging $349,000.00 and uses the same houseplans.

Posted by: BARBARA S. at July 8, 2007 8:35 PM